Exclusive: Energy utility costs went up, but made up a smaller percentage of expenses for new homebuyers
Despite surging energy utility costs, homebuyers in 2021 spent a smaller share of their annual expenses on heating and electricity compared to previous years.
Nationwide, heating and electricity bills were equivalent to 15% of the typical new homebuyers' annual mortgage payments – one percentage point lower than in 2020 and almost nine percentage points lower than a decade earlier, according to a Redfin analysis shared exclusively with Paste BN.
The report analyzed MLS mortgage-cost data in the 50 most populous U.S. metropolitan areas and state-level energy cost data from the U.S. Energy Information Administration.
The percentage decrease cannot be attributed to a drop in energy utility costs. In fact, nationwide, the average annual energy utility cost rose 6.8% year-over-year in 2021 due to soaring natural gas prices.
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Instead, soaring home prices resulted in mortgage costs taking a bigger bite of the budget.
Mortgage payments vs. energy costs
The median home sales price was $346,900 in 2021, up 17% from 2020, and the highest on record going back to 1999, according to the National Association of Realtors.
“Even though energy costs rose in 2021, they represented a smaller share of mortgage costs than in the past,” said Redfin Senior Economist Sheharyar Bokhari. “That’s because they increased at a much slower rate than home prices, which skyrocketed during the pandemic due to record-low mortgage rates and a wave of relocations made possible by remote work.”
Energy costs between metro areas don’t vary nearly as much as home prices, which is one reason relatively affordable metro areas rank at the top of the list with the highest energy costs while expensive areas are at the bottom.
In San Jose, California, the typical household spent an estimated $2,138 on energy expenses last year, not much more than the typical Clevelander. But that San Jose estimate was equal to just 4% of the annual mortgage payment for buyers – the lowest of any major metro. For Cleveland homebuyers, on the other hand, the typical energy utility bill is equal to 31% of mortgage costs– a higher percentage than any other major metro area.
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Metros with high energy bills
The states that saw the largest jump in energy utility costs were Oklahoma, where it climbed 22%, followed by Louisiana at 14.5%, and Arkansas at 14%.
"The increase in energy utility costs for households in states like Oklahoma, Louisiana, and Arkansas which saw the biggest annual increases last year can largely be attributed to weather-related events and higher energy costs at the state level, says Bokhari.
See how these metro areas stacked up:
Swapna Venugopal Ramaswamy is a housing and economy correspondent for Paste BN. You can follow her on Twitter @SwapnaVenugopal and sign up for our Daily Money newsletter here.